Newcastle's second-string take on Rovers at Whitley Park (kick-off 7pm GMT) in their final Group C fixture and must win in order to seal their place in the last eight, with Ben Dawson's side three points adrift of leaders Benfica.
Walters - an ever-present at left-back - is aiming to end the year on a positive note against a Blackburn side plying their trade in the top tier of Premier League 2, a division above the young Magpies.
The 19-year-old told nufc.co.uk: "The game is very important for us because if we can win, we will progress into the next round of the cup and it's something that we targeted when we entered the competition.
"We have learnt a lot in this competition so far, particularly playing against Benfica and Hertha Berlin, as they play differently to teams we normally face in the league.
"Blackburn will be a good team as they are in the top division but a lot of us have played against them in the younger age groups so we know what to expect. It will be a tough test but we will all be looking to put in a good performance and get the win.
"We can take a lot of positives from the games against Benfica and Hertha Berlin heading into this game against Blackburn as we know when we are playing well, we are capable of beating any team in this competition."
Newcastle's second-string suffered a disappointing 4-0 defeat away at West Ham United in Premier League 2 on Monday but have been impressive in the Premier League International Cup after a respectable draw against Benfica followed by a 3-1 win against Hertha Berlin.
And Walters is hopeful Newcastle's youngsters can quickly bounce back from their heavy loss to the Hammers and continue their strong displays in the cup competition.
The defender added: "It was a disappointing performance from us (against West Ham United) and we know we need to be a lot better so we will be working hard in training this week to put our mistakes right and try to bounce back against Blackburn with a strong result.
"It's important to move on quickly as we play on Friday and we need to perform well if we want to be progressing from the group.
"It would be great to end 2019 on a high and then take it into the second half of the season, trying to push to get into the play-off spots in the league and continue progressing in the cup competitions.
"I've really enjoyed this year as I've played nearly every minute of every game so that's been great. My favourite moment was probably winning the Tyne-Wear derby against Sunderland a couple of months ago."